(Original post by scrotgrot)
We are not Greece, we are the sixth or seventh largest economy in the world and people pay their taxes here. Don't be pathetic, the right-wing press has told you to fear financial collapse.

If reducing the welfare state is so important, then why is the government going for the areas with the smallest spends first? Pensioners get all their stuff ring-fenced and not even means-tested, despite being the biggest spend. The jobless and disabled are disenfranchised and too weak, defeated and housebound to fight back. That is why they have been targeted with social security cuts.

And why do we have enough money to go gallivanting off to Libya or Syria or to retain our Trident missiles, which we've had 30 years and only ever fired one of (to sink the Belgrano)

If it was me in charge the cuts would be sensible-I e cutting Mps pay and expenses before cutting library services

I would also introduce means testing for ALL benefits bar pensions-which people have paid years of NI for

(Original post by Aspiringlawstudent)
No, I mean don't you think it has to get the money for this somewhere?

You don't seem to think that the debt is a problem at all - you do realise that if we don't look like we're able to pay our debts (which, of course, we can't pay) nobody will lend us money - and if people won't lend us money, how will we pay for these programs you want to keep? We certainly can't afford it out of taxation - taxes are already very high; so high in fact that I'm planning on leaving as soon as I can afford to.

You have little historical perspective here. The debt was astronomical, something like 300% of GDP, for most of the 1800s, and it was also very, very much higher than now during the Depression and war, when we managed to set all this welfare stuff up.

That's because the debt ISN'T a problem at all, it's the deficit that matters. In recent history growth brings down the deficit quickly (e.g. 1990s) and austerity brings it down slowly (e.g. 1980s).

In 1976 we had to be bailed out by the IMF. In 1992 we were in such a mess that we got kicked out of the ERM. That must have put lenders off a lot more than losing one notch of credit rating, and we got through both crises pretty well, didn't we?

If I was a lender I would be much more concerned about how the economy has flatlined for longer even than the Great Depression (when we also had austerity).

You also ought to look further back into history when pontificating on tax. Throughout the post-war consensus period the top tax rate was 70% most of the time and it occasionally rose as high as 90%. In fact I have read that at one point because of some arcane surcharge the effective tax rate on the top band of income rose above 100%!

(Original post by mucgoo)
I was being sarcastic if you read the next bit about inflation. E.g you create your nominal 8% GDP growth. In real term look at Zimbabwe and 1920's Germany. Scrotgrot's suggestion that you don't need to worry about deficit is obviously nonsense.

Thing is since 2007 the debt increased by about 50% of the GDP and the deficit is still around 8% of GDP. I wouldn't call the current system austerity and how much more needs to be spent for Keynes to start working.

(Original post by Aspiringlawstudent)
In what sense are we not in a debt crisis?

Have you ever read an economics textbook?

Countries have always run in debt. A rate of change in debt is the only factor that causes a debt crisis not the level of debt. Japan has a debt to GDP ratio of 225%. greece has a debt to GDP ratio of 130% or thereabouts. Yet, Japan has very low borrowing rates, and its currency is one of the safest to invest in as a reserve currency. Why? Because it's a highly competitive economy. Yes, Britain needs to engage in reforms and trim the excess public sector 'fat', but right now the policies need to be targeted at primarily growth for the short and medium term. When the economy is away from the stagnation, only then can we start to deal with the debt. But not now. Doing so will only make things worse. Which it is.

(Original post by Namige)
Countries have always run in debt. A rate of change in debt is the only factor that causes a debt crisis not the level of debt. Japan has a debt to GDP ratio of 225%. greece has a debt to GDP ratio of 130% or thereabouts. Yet, Japan has very low borrowing rates, and its currency is one of the safest to invest in as a reserve currency. Why? Because it's a highly competitive economy. Yes, Britain needs to engage in reforms and trim the excess public sector 'fat', but right now the policies need to be targeted at primarily growth for the short and medium term. When the economy is away from the stagnation, only then can we start to deal with the debt. But not now. Doing so will only make things worse. Which it is.

As I've said, you are only in a debt crisis if the structural deficit is unsustainable and borrowing costs are high. The UK is experiencing non of these, and there is no growth. Why can't Osborne have the common sense to deal with the problem of stagnating/falling wages and induce growth, and then deal with the debt and structural issues later? Is it right to have millions of workers suffering gratuitously for this long, for political reasons? I don't think they should.

(Original post by Namige)
As I've said, you are only in a debt crisis if the structural deficit is unsustainable and borrowing costs are high. The UK is experiencing non of these, and there is no growth. Why can't Osborne have the common sense to deal with the problem of stagnating/falling wages and induce growth, and then deal with the debt and structural issues later? Is it right to have millions of workers suffering gratuitously for this long, for political reasons? I don't think they should.

The deficit is high. Read my post a few post up about the lack of real austerity. What do you propose should be done to make the UK the magical exception to the problems of the developed world.

(Original post by mucgoo)
The deficit is high. Read my post a few post up about the lack of real austerity. What do you propose should be done to make the UK the magical exception to the problems of the developed world.

Most of the developed world is engaged in heavy austerity. The EU in particular. America, not so much and that is why their economy is recovering well. The Germans, French have very little to worry about, yet they are cutting back and harming those that are trying to cut back (because they have to). My spending is your income. Your spending is my income. If we both try to slash spending and cut back at the same time, what happens is, we both lose. It's as simple as that. You should read up on the 'Capitol Hill baby sitting crisis'.

(Original post by Namige)
Most of the developed world is engaged in heavy austerity. The EU in particular. America, not so much and that is why their economy is recovering well. The Germans, French have very little to worry about, yet they are cutting back and harming those that are trying to cut back (because they have to). My spending is your income. Your spending is my income. If we both try to slash spending and cut back at the same time, what happens is, we both lose. It's as simple as that. You should read up on the 'Capitol Hill baby sitting crisis'.

Just completely ignore what I said.
The UK can't exactly increase its spending much more. Its not exactly at a low base.

And what you've suggested isn't something Osborne could do to magic up growth which you seem to believe he's deliberately suppressing for unknown political reasons.

(Original post by mucgoo)
Just completely ignore what I said.
The UK can't exactly increase its spending much more. Its not exactly at a low base.

And what you've suggested isn't something Osborne could do to magic up growth which you seem to believe he's deliberately suppressing for unknown political reasons.

Why can't they? Deficit spending is a must if any country is able to get itself out of its hole. Let me reiterate - you spend when in a recession, save when you are not. Not the other way round. By concentrating on trying to reduce the deficit, all it does is stagnate the economy with little progress in achieving the aim. But when there is growth, it is very easy to cut the deficit and run a surplus. You aren't going to suddenly bring in the confidence fairies by engaging in austerity and using the pretence of credibility. That is wishful thinking.

(Original post by Namige)
Why can't they? Deficit spending is a must if any country is able to get itself out of its hole. Let me reiterate - you spend when in a recession, save when you are not. Not the other way round. By concentrating on trying to reduce the deficit, all it does is stagnate the economy with little progress in achieving the aim. But when there is growth, it is very easy to cut the deficit and run a surplus. You aren't going to suddenly bring in the confidence fairies by engaging in austerity and using the pretence of credibility. That is wishful thinking.

Because it relies on a change in foreign government policy. Osborne can't cause foreign governments to start spending.

We've done lots of spending and it still are doing so despite the stuff about austerity. 50% increase in debt since 2007 and an 8% deficit certainly seems very Keynesian to me.
How much more do you want?

(Original post by mucgoo)
Because it relies on a change in foreign government policy. Osborne can't cause foreign governments to start spending.

We've done lots of spending and it still are doing so despite the stuff about austerity. 50% increase in debt since 2007 and an 8% deficit certainly seems very Keynesian to me.
How much more do you want?

The deficit could be raised to 12%, debt to gdp up to 130% as long as it puts the economy in a position to start paying it back, and millions of workers back in their jobs. It is mainly the idiotic German and french government that are taking austerity measures. Doing so only worsens the situation in Greece where they HAVE to cut back. Spain seems to be doing quite well in its budget position. But 25% unemployed and 50% youth unemployment. Is it right to maintain a strong budget position at the expense of mass unemployment?

(Original post by Namige)
The deficit could be raised to 12%, debt to gdp up to 130% as long as it puts the economy in a position to start paying it back, and millions of workers back in their jobs. It is mainly the idiotic German and french government that are taking austerity measures. Doing so only worsens the situation in Greece where they HAVE to cut back. Spain seems to be doing quite well in its budget position. But 25% unemployed and 50% youth unemployment. Is it right to maintain a strong budget position at the expense of mass unemployment?

But in the event that a fairly marginal increase from 8-12% fails and the economy continues to flat line we're screwed. The same applies for the euro zone as a whole.
Unemployment is actually fairly low in the UK at 7.8%, so only about 3% above the low in 2005-7. I don't see why you see that as a issue for us?

Consumer don't have much in the way of spare capacity to start spending anyway. Look up household debt to GDP chart.

(Original post by mucgoo)
But in the event that a fairly marginal increase from 8-12% fails and the economy continues to flat line we're screwed. The same applies for the euro zone as a whole.
Unemployment is actually fairly low in the UK at 7.8%, so only about 3% above the low in 2005-7. I don't see why you see that as a issue for us?

Consumer don't have much in the way of spare capacity to start spending anyway. Look up household debt to GDP chart.

The economy can't flatline with an increase in spending. Unless you burn the money before you spend it. And '3%' more people is a million people. You cannot just look selfishly at statistics and write off the million people, that includes low skilled workers as well university graduates that have paid good money for their education. Youth unemployment at 25% will certainly damage future potential in the long run.

The increase in budget deficit from 8% to 12% is about 80 billion. Along with any additional multiplier effects, that will eventually amount to a hell of a lot more. And you are right about the lack of consumer spending. Wages are low, and employers are unwilling to employ and raise wages because they lack confidence and austerity measures are making this worse. You can deregulate all you want, give firms all the cheap credit they want, but the only way to for them to start investing and expanding is for demand to rise. Think about it. If you had a business, what would be the thing that entices you to start expanding your business?

(Original post by Namige)
The economy can't flatline with an increase in spending. Unless you burn the money before you spend it. And '3%' more people is a million people. You cannot just look selfishly at statistics and write off the million people, that includes low skilled workers as well university graduates that have paid good money for their education. Youth unemployment at 25% will certainly damage future potential in the long run.

The increase in budget deficit from 8% to 12% is about 80 billion. Along with any additional multiplier effects, that will eventually amount to a hell of a lot more. And you are right about the lack of consumer spending. Wages are low, and employers are unwilling to employ and raise wages because they lack confidence and austerity measures are making this worse. You can deregulate all you want, give firms all the cheap credit they want, but the only way to for them to start investing and expanding is for demand to rise. Think about it. If you had a business, what would be the thing that entices you to start expanding your business?

If we get hit by a Euro crisis or spiking oil prices then its perfectly possible.
Without those kind of shocks will growth be great and sustainable enough when deficit spending gets removed that we can start tackling the 130% or so debt to GDP ratio? And why isn't 8% sufficient but 12% will be?
Its actually £40bn. Multiplier effect are a complete unknown with. Hell they can be below zero but that's not true at this time.
As I said look at household and business for that matter debt. I can't help but think that a period of either horrendous inflation or a lost decade is unavoidable.

(Original post by mucgoo)
If we get hit by a Euro crisis or spiking oil prices then its perfectly possible.
Without those kind of shocks will growth be great and sustainable enough when deficit spending gets removed that we can start tackling the 130% or so debt to GDP ratio? And why isn't 8% sufficient but 12% will be?
Its actually £40bn. Multiplier effect are a complete unknown with. Hell they can be below zero but that's not true at this time.
As I said look at household and business for that matter debt. I can't help but think that a period of either horrendous inflation or a lost decade is unavoidable.

Why would the multiplier effect be a negative number? It wouldn't even be less than 1, as a basic principle unless somehow money goes missing as it before it is spent. I'm really seriously starting to doubt your fundamental knowledge of economics... Anyway, household debt is under control right now. But unemployment, low/decreasing real incomes as a result of austerity will NOT help this. And you've just proved my previous point. When the private sector is involved in a deleveraging process, it is the government's aim to fill in the gap. There will be no competition for credit, so you won't get crowding out and therefore higher interest rates. Your spending is my income. My spending is your income. If we both try and cut spending at the same time, we both lose. With the government trying to cut back debt, it makes things worse for both themselves, and the private sector.

I would happily see inflation rise to 5%, as a way to erode the real cost of debt and discouraging savers. It might seem immoral but it is a far better alternative to unemployment and a lowering of standards of living. But high inflation will not happen unless there is a surge in demand, non-existant confidence(which is very highly unlikely in a developed economy) and an insufficient growth in AS which is also unlikely if most of that spending goes into infrastructure building.